Spending too much? Plan and be mindful

Consumer spending in January climbed higher than predicted, swelled in part by the biggest increase in services outlays since 2001.

The spending on services was likely driven by the unusually cold weather and higher-than-normal heating costs, but household purchases, which account for about 70% of the economy, were also up by 0.04%, according to Commerce Department figures (Bloomberg March 3).

The financial forecast anticipates consumers will continue spending more on goods and services as hiring gains, climbing housing values, and a robust stock market drive an improving economy.

But, just a few years out from the Great Recession, are Americans already spending too much? Last month The Wall Street Journal reported that most financial planners would say, “Yes.”

The reasons are varied–lack of a budget or a desire to maintain appearances–but, to better manage your spending, many financial advisers recommend tracking your cash flow and monitoring your emotional state.

Here’s how:

Plan. It’s not only big expenses that put you in debt. More likely it’s “death by a thousand tiny cuts” eating up your income. Track your spending with a notebook or online app, shop with a list, consider using only cash for a couple of months, and set up monthly automatic deductions from your share draft/checking account into an emergency savings fund.

Set limits. Know what pleasures you can’t live without and decide in advance how much you’ll spend on them each month. Try to focus on the joys in your life that cost nothing–friends, family, a favorite public park–and for big-ticket items, set aside a little each paycheck until you can afford to buy it.